India restricts secondary steel producers but allows major state-owned steel mills to run at normal capacity with reduced manpower to control the spread of COVID-19.
Secondary steel mills (induction/electric furnace mills, re-rollers and sponge iron producers) in India have shut down operations as the government order closure of all non-essential activities to fight against spread of COVID-19. Almost all state governments in India have ordered a lockdown until March 31. Movement of goods across state borders are also restricted within the country, besides the sealing of international border until March 31.
COVID-19 lockdown is expected to adversely impact most secondary producers as they cater to the domestic market and supply steel to small projects. Secondary mills contribute around 55pc to India’s domestic steel production. India’s primary mills caters both to the domestic as well as international markets and are focused on mega infrastructure projects.
Primary mills in India transport raw materials like iron ore, cooking coal and semi-finished goods through railways which are not impacted by the lockdown. But even primary steel producers are facing the challenge of dispatching their finished goods from stockyards to consumers, which has completely halted. At Sail’s Bhilai plant, manpower is drastically reduced and the plant has closed stockyards and dispatches by trucks until the movements of goods through roadways resume. Officials here expect a further extension of the lockdown until April 5.
If the lockdown continues for a long period, large mills are likely to face a steep rise in inventory level which may lead to rollover or drop in steel prices in early next month. Primary mills including Sail, Vizag Steel, JSW Steel, Tata Steel and JSPL are yet to announce any production cut. Most of these mills produce steel through the blast furnaces route and shutting furnaces is not cost-effective as they take 2 to 3 months to restart.
Despite the possibility of inventory stockpile, India’s Steel Ministry has directed state-owned steel mills including SAIL, Vizag Steel and mining companies like NMDC, KIOCL and MOIL to continue operating at normal levels. Government is also mulling to include the steel industry under essential services and allow operations to continue through the lockdown period.